USD/JPY is expected to trade in a higher range as the bias remains bullish.Overnight, US stocks were broadly higher at close, lifted by materials, energy and bank shares. However, technology stocks were weighed down by weak earnings. The Dow Jones Industrial Average gained another 0.3% to 18053, the S&P 500 also rose 0.3% to 2100, while the Nasdaq Composite was down 0.4% to 4940.
Nymex crude oil rose 3.3% to $41.08 a barrel, gold increased 1.5% to $1,250 an ounce and silver surged 4.4% to $16.93 an ounce. Meanwhile, the benchmark 10-year Treasury yield edged up to 1.783% from 1.773% in the previous session.
On the economic data front, new-home construction dropped 8.8% month-on-month to 1.09 million units in March (vs 1.17 million units expected), the lowest level since October, and building permits fell 7.7% month-on-month to 1.09 million units (vs 1.2 million units expected), a one-year low.
Dragged by soft economic data, the US dollar kept weakening against most other major currencies, with the Wall Street Journal Dollar Index declining 0.4% to 85.68. Commodities-linked currencies continued to press higher, with USD/CAD sliding another 0.9% to 1.2666, AUD/USD gaining 0.8% to a 10-month high of 0.7811 and NZD/USD surging 1.4% to 0.7042, also a 10-month high. The pair ran up to 109.48 yesterday before entering a consolidation. Currently it is trading around the overlapping 20- and 50-period moving averages. The intraday relative strength index has slid below the neutrality level of 50, indicating the possibility of further consolidation. However, as long as the level of 108.50 holds as the key support, the intraday outlook remains bullish and the pair is expected to re-visit the first upside target at 109.45 (around yesterday's high) and the second one at 109.75 (around the high of April 15).
Trading Recommendation:
The pair is trading above its pivot point. It is likely to trade in a wider range as long as it remains above its pivot point. Therefore, long positions are recommended with the first target at 109.45 and the second one, at 109.75. In the alternative scenario, short positions are recommended with the first target at 108.10 if the price moves below its pivot points. A break of this target is likely to push the pair further downwards, and one may expect the second target at 107.80. The pivot point is at 108.50.
Resistance levels: 109.45, 119.75, 110.10
Support levels: 108.10, 107.80, 107.30
The material has been provided by InstaForex Company - www.instaforex.com